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(Module I, II, III, IV, V)

Financial Planning Standards Board (FPSB), India 312, Turf Estate, Off Dr. E. Moses Road, Mahalaxmi, Mumbai . 400011

**MODULE I: Introduction to Financial Planning
**

Questions

1. The new Senior Citizen’s Savings Bond Scheme offers ________ % Interest. a. 8.5 b. 9 c. 9.25 d. 8.75 (1 Mark)

2. The maximum amount that can be invested in Public Provident Fund is Rs._____ a. 70000 b. 60000 c. 80000 d. 90000

(1 Mark)

3. _____________ is regulated by the Reserve bank of India. A. Bank Deposit Rates; B. Bank Lending Rates; C. Certificate of Deposit Rates a. A b. B c. C d. None

(1 Mark)

4. The investment objective of equity funds usually is _________ a. Long Term Capital Appreciation b. Safety of Principal c. Regular Income d. Capital Appreciation and Regular Income

(1 Mark)

5. _________ is / are governed by SEBI. a. Mutual Funds b. Stock Brokers c. Portfolio Managers d. All of the above

(1 Mark)

6. A person can be qualified as an Associate Financial Planner after he/she passes modules of the CFP Certification Course. (1 Mark) a. 6 b. 2 c. 3 d. 5 7. The first step of the financial planning process is ___________. a. Evaluating the various Alternatives b. Data gathering and goal setting c. Establishing the Client Planner relationship d. Plan Review

Page 2 of 2

(1 Mark)

e) To purchase life and health insurance. Seema and Arun are co-applicants of a mortgaged house.74 10. -3. Lending at a higher rate of interest d. (2 Marks) a. Default c. 8 9. They are on the verge of a divorce.5 c. mediate reconciliation between the couple. 3. If the post tax rate of return on an investment is 8% and the inflation rate is 5% the real rate of return is___ (2 Marks) a. a.86% d. Borrowing at lower cost in order to pay off higher cost debt b. Currency 12.0% c. repossess the house after divorce c. 8. e. c) To set up a contingency fund amounting to 3 months of living expenses d) To start saving for retirement. Page 3 of 3 . Volatility b. Jack and Jill approach you to be their Financial Planner their funds are limited and their needs are many. Inflation d. Increase the interest rate in order to compensate for the increased risk 11.a. 10 d. 2. Some of their needs are: a) To start an investment plan for funding their child. a. The Housing Finance Company will ___________.8. 9. Price e.0% e. b) To set up a Testamentary Trust for their child. insist on the house being transferred to one of them d. All of the above e.? (2 Marks) a. Strategic d.5 b.5% b. Refinancing is ______________. 2. ________________ Asset Allocation is not a text book Asset Allocation Model. Tactical b. None of the above (2 Marks) (2 Marks) 14. How many years will it take for a sum of Rs. 9 e. Scrutinizing your receivables e. Discretionary c. Repaying debt by selling off assets c. None of the above 13.10000 to double if the rate of return is 9% p.s education. 3. Domestic GOI bond holders (holding them up to Maturity) have to deal with ___________ risk. not interfere as long as the EMIs are being paid on time b. (2 Marks) a.

000 in three years time for a one-month trip to the USA. compounded quarterly. what will be the value of the investment in five years time? (4 Marks) a. Amar wants to purchase Car 5 years from now. 6. in a bank deposit. 6.5000 in a Bank Deposit today @ 8% p. a. What is the value of the deposit at the end of 5 years and the quantum of withdrawal each year? (4 Marks) a. quarterly.10. 1. A 10 year 9 % Bond (Face Value of Rs.03 d. His investments are currently worth Rs.78 17.a compounded monthly.11.07. 6878 d.875 b. 108. 10656 c. Assuming that the annual investment rate of return is 8% compounded semi annually.16. For a nominal interest rate of 6% payable monthly. Assuming she can get an 8% annual return on her investments. 6925 18. 1. 1.9000). 6870 c.Arrange these needs in the descending order of priority. Sanjeev invests Rs.240 20. 29010. 28804. d e b c a c. 6.50. (2 Marks) a.97.69 d.100. She then withdraws the accumulated sum over a period of 3 equal annual installments. interest payable annually) maturing 3 years from today is available at a YTM of 5.09 c. 9954 b.at the beginning of every six months period to fund his purchase.06 16. What will be the value of this investment in four years? (4 Marks) a. Neeta wants to accumulate Rs. 000/. c e a d b b. 6. 102. Therefore the current price is _________ (2 Marks) a. 50. and semi-annually. 6802 b. which commences after 4years. b e a c d (2 Marks) 15. 110.13.10. 6.95. 6.04. 29568.01 b. 10042 19. 6.5000 per year (at the beginning of each year) for 5 years @ 5% p. 6.8%.1. how much must she invest today in order to achieve her goal? (4 Marks) a. 6. He hopes that this investment will enable him to fund his college education (estimated to cost Rs. b d e a c d. 104. 28505. 6. 6.50 b. Sudha invests Rs. 000/and he intends to contribute Rs.98.555 c. 117591 Page 4 of 4 . the effective rates respectively would be _______________.02. 11054 d. 6.08.a.09 c.

931095 d.10000 Rs.500 each. (4 Marks) a.12000 Rs. 609870 Page 5 of 5 . What did he receive on maturity? (4 Marks) a. 185 23. John has purchased 100 convertible debentures of Essar Oil on 1/1/94 at Rs. John exercised his option on 1/4/2001 and received 100 shares. 776774 c. 205 c. Mr. 119487 c. 676774 b. 118274 21. John has estimated that the following will be his outgoings over the next few years: End of Year 1st 2nd 3rd 4th 5th Cash Outflow Rs.15000 Rs. 50483 22. 195 d.11000 If John wants to cater to these cash outflows. assuming an annual rate of return of 5%? (4 Marks) a. 420000 for 7 years @ 7% where it was compounded annually for the first 5years and quarterly for the last 2 years. how much should he have today.50 each after seven years. 52483 d. 200 b. 40% of the value of the debentures is convertible into one share of Rs.b. 54126 b. Compute the cost of acquisition of these shares. Mr.13500 Rs. 53220 c. Mohan invested Rs.

Of compounding periods = 10.13. 7. 5. Joshi will be 3 Lakh (4 Lakh at present less 1 Lakh of Mr. a. 2. (1+0. n = 48.20000. 3.29010 r = 5% n = 3 therefore PMT = Rs. Function to get the rates. 200 Working Note: Initial Cost: Rs. a. 1. So Mr. Joshi’s personal expenses) for 40 years. 12. c. 2. c. 000. 10656.5000 i= 5% n = 5 years Future Value = Rs.875 20. 4. 23. b. Mr.29010.1.05). No. 53220 Family expenses after death of Mr.09 Working Note: Use.16%. c. Therefore cost per share = Rs. r = 72/n Therefore. 8 Working Note: Use Rule of 72 i.50000.1.200. b. No. Stage I: PV = Rs. b. 1 =2. r = 7%. . a. 118274 Working Note: PV = To be found Rate of Return = 8%/4 = 2%. 1. I = (7/100)/4. 589072. Similar calculations for quarterly and semi annual compounding. Current investment is 20 Lakh + funeral cost will be 1 Lakh. 9 70000 None Long Term Capital Appreciation All of the above 2 Establishing the Client Planner relationship 8. 50. Therefore. 6. 17. 11. 98. 29010.e. Future Value at the end of three years = Rs. d. 6878 Working Note: Use Future Value Function where PV = Rs. Therefore FV= Rs. Not interfere as long as the EMIs are being paid on time Inflation Borrowing at lower cost in order to pay off higher cost debt Discretionary ceadb 15. a. 13. Annuity Amount = Rs. At 3% discount the present value of 3 Lakh for the next 40 years is 69. 19. For monthly compounding: If PV=Re. r = 8%/12. Therefore. PMT = Rs. Then Use PMT Function to find the annual withdrawal where PV = Rs.08/1+0. n = 5 years. 108. 676774 Working Note: Use FV Function. n = 8 quarters.Therefore the Future Value at the end of five years = Rs. Stage II: PV = Rs. b.0616 and therefore rate = 6. b. 6. 10656 Working Note: Use Future Value function to get the value of deposit at the end of 5 years. Joshi’s insurance will be (69.35 –20+1) = 50. FV=Rs.SOLUTIONS 1. a.98 21.1 i=6%/12 n = 1*12 Therefore FV = 1.000/-. Type of Annuity: Immediate. 14.35 Lakh 22. c. 118273. c.875 Working Note: PV = Rs. Therefore FV = Rs. a. e. a. 420000. c. 40% thereof = Rs. a. John gets 100 shares on conversion.50.98.5000. 589072. 16.86% 10. of compounding periods = 12. 6. 6878/18. . d. 000 Rate of Return = 8%/2 = 4%. 6. 676774 Page 6 of 6 .69 Working Note: Use YTM Function to get the price. Future Value.10.35 Lakh. b. n = 8 years 9. Therefore the amount to be invested today is Rs.86% Working Note: Inflation adjusted return: (1+r/1+i).16.

250 b. Disability Income Protection c. Inspection d. Third Party Administrators directly reimburse the Policyholders for any expenses incurred.Module II: Risk Management & Insurance Planning Questions 1. SEBI c. The process of due diligence conducted by an insurance agent is known as ___ (1 Mark) a. True b. Health d. a reinsurance broker must have a minimum paid-up capital of INR _____ lakhs. Life c. As per IRDA Regulations. Investigation c. Officers Liability b. Data Insufficient (1 Mark) 8. (1 Mark) a. (1 Marks) a. False c. False c. A young unmarried individual (aged 20-23 years) with no dependents should ideally opt for the following insurance first. (1 Mark) a. (1 Mark) a. 50 7. Health Page 7 of 7 . Site check 2. IRDA b. A person over the age of 60 generally requires _______ Insurance more urgently. Life 3. 200 c. Which type of insurance is not easily available in India? (1 Mark) a. Long term Care 5. Underwriting b. Insurance brokers are governed by _________ a. (1 Mark) a. Insurable Interest can exist between a Member of Parliament and his (unrelated) party workers. Property b. Data insufficient 4. Both IRDA & SEBI 6. Professional Indemnity c. True b. Life b.

True b. A. As per IRDA. C. A. Negotiated a. IRDA Act 15. Contract Act b. B. (1 Mark) a. (1 Mark) a. Building b. B c. Indemnity. (1 Mark) a.50 lakhs for Rs. 3 c. Only B 17. Motor 13. Insurance can be ________ contracts. Life b. 20 lakhs. C. The application of the law of Contract does not apply to ______ contracts. C d. Stock market. Either B or C b. 2 b. True b.30 lakhs. False 12. None of them 16. B. (1 Mark) a. Health c. ______________insurance is a Tariff Product. (1 Mark) (1 Mark) a. Securities Contracts Regulation Act c. How much will he receive from the Insurance Company? (2 Marks) a. Only A c. Jewelry 11. Home Contents c. The house is destroyed in a fire and he suffers losses worth Rs. Benefit.9. Ram insures his home worth Rs. False 14. A b. An Insurance Agent must disclose his/her commission to the client in an upfront manner. Insurance. An insurance contract is an aleatory contract. Insurance Contracts adhere to Principles laid down in the _____________. 5 10. the incontestable clause comes into effect after ____ years. 20 lakhs Page 8 of 8 (2 Marks) (2 Marks) . Property Deals a. 4 d. Burglary d. a. Householders cover does not include damage/loss to _______.

Other information you have is: Current investment port folio .75. Only B b. Calculate the insurance requirement under the Need Based method. 30 years and married. a.b. Medical Cover b.10 lakhs c. Present annual expenses-Rs.5 lakh. What in your judgment would be the life cover required for Mr. A & B b. Coerced consents are acceptable. 16 lakhs c. Joshi is a homemaker.Rs. Property Insurance d. He already has his own home and savings of Rs.50 lakhs b.20 lakh.42 lakhs.50. Only C 20. which provides him with medical cover. (4 Marks) (2 Marks) (2 Marks) a.3. Joshi on the basis of each of the two approaches.2 lakhs. 1300 c.. Joshi 's post-tax income in hand-Rs. Two ways of assessing life insurance needs is a need-based approach and the other is the income replacement method. Consideration C. works for a firm. Assume a post tax. A & C c. Mr. 1200 Page 9 of 9 .Rs. post inflation return/discounting factor of 3%. (4 Marks) a. Estimated final Expenses . Whenever an insurer partly reinsures the risk with a re-insurer. Rs.69. find the premium to be paid by each of the 50000 applicants. A c. which are well invested. A. Life Cover 19. Risk Transfer C. Which of the following might be the most important insurance for him? (2 Marks) a. Rs.46. 1350 d. Risk Avoidance a. Life expectancy for both of them is another 40 years. If the mortality tables show that out of 50 lakh people 30000 die within a year. The following is not a principle essential for a valid contract: A. Mr. They have no children. Offer and acceptance B. B & C 21. Mrs. Joshi is the sole income earner in the family. A group of 50000 persons each aged 35 years wishes to apply for Term Insurance for a one year period for a sum of Rs.. Risk Retention B. 4 lakh (including a lakh of Mr. it is a case of. 1 lakh. In the next twenty years he will be able to save up enough to fund his retirement and his children’s education. Joshi 's personal expenses) . Rs.. Rs.35 lakhs 22. Temporary Total Disablement Cover c. Abraham.50 lakhs d. B d. 12 lakhs 18. 1250 b. They are aged 40 and 36 respectively.

Page 10 of 10 .s expenses after death of Mr. Long term Care a. No. Rs. a. 9. a. 7. True 12.35 Lakh.06. False c. False 14. Life Cover 19. c. a. Disability Income Protection b. c. d.06 = 300. a. Contract Act 15. 12 lakhs 18.Solutions 1. 8. Building 11. b. d. Joshi’s Insurance will be (69. 1200 Working Note: Mortality rate = 30000/5000000 = 0. c. Motor 13. 3. C only 20. a.35 Lakh. 6. Either B or C 17.15. Health a. Joshi’s personal expenses) for 40 years. d. False c. 5. 2 10. A & B 21. d. of persons in the group who are likely to die in a year = 50000*0. At 3% discount the present value of 3 Lakh for his next 40 years is 69.35 –20 + 1) = 50. 2.Joshi will fall to Rs. Mr.4 lakhs Working Note: Family.3 lakh (4 Lakh at present less 1 Lakh of Mr. a. the total amount of claim payable 200000*300 = 6000000. None of them 16. Premium per person = 6000000/50000 = Rs. 4. 200 b. 22. Current investment is 20 Lakh + funeral cost will be 1 Lakh. Underwriting b. IRDA b.1200.

(1 Mark) a.MODULE III: Retirement Planning & Employee Benefits Questions 1. 8. Contributions to an Unrecognized Provident Fund will result in: A. (1 Mark) a. 10 c. 11. Combination of Defined Benefit and Defined Contribution (1 Mark) (1 Mark) 7. Defined Benefit b. __________% of Gratuity received on retirement by a Central Government employee is taxable. 33 c. C. 35 4. Defined Contribution c.33. Employees Provident Fund is applicable to firms employing over ___________ employees. B & C 5. A c. 15 c. Pension plans eligible for benefit u/s 80 C have a tax-free commutation option up to _________ of the eligible corpus as at the vesting date. Thirty-Three 6.33. Gratuity is categorized as a__________ Plan. An employee can contribute beyond ________ of his salary his salary towards EPF but he will get tax benefits u/s 80 C only up to _________. a. Ten b. (1 Mark) a. Nil c. 30 b. 20 b. 12 d. Pensions received from an employer are classified under ____________. Taxing of Interest Income earned by the employee on employer contributions B. A & C b. 10 d. a. No Rebate u/s 80 C to the employee a. 25 2. Twenty e. (1 Mark) a. Twenty-Five d. Income from other sources Page 11 of 11 (1 Mark) . 11. 25 d. 12.33 3. 10. B d. Employer cannot treat the PF Contribution as a deductible business expense.33 b. 8.

What is the tax status of this amount? (2 Marks) a. Page 12 of 12 taxability of Gratuity. Fully exempt b. the term Salary usually (1 Mark) (1 Mark) (1 Mark) (1 Mark) . a. 20. 10% 15. Vinay has been an employee of a public sector undertaking for the past 15 (completed) years and is retiring on 1st December next year. Basic + Dearness Allowance c. If the inflation rate is 4.000. Her monthly salary at retirement is expected to be Rs. a. Leave Salary received during the tenure of employment is____________. 9% c. While determining the includes____________________. The Income Tax Act will only allow a maximum exemption upto 15 day's wages per completed year of service. 11. Amit's employer has agreed to pay him a gratuity amount of Rs. Exempt up to a certain ceiling c. The rest is taxable. It will be worth Rs. The required rate of return to maintain the value of an investment is___________. 1972.00 d. Real returns is defined as____________________. in order to fund her retirement. It will be worth Rs. (2 Marks) a.00 14. Nominal interest rates are lower than real interest rates. Nominal interest rates are higher than real interest rates. 3. 13. 3. 16412. b. It will be worth Rs.000. 7% d.50000. What will be the effect in terms of buying power on today’s Rs. 8% b. Fully taxable 10.b. a. b.00 b. b.a? (2 Marks) a. Nominal interest rates are equal to real interest rates. Nominal returns adjusted for time value of money. Nominal returns adjusted for inflation. The gratuity paid is exempt from Income Tax only to the extent of Rs.9% and tax rate is 30%. 14921. The amount of gratuity that she will receive will be ___________________. The amount of gratuity payable to him cannot exceed Rs. c.000 on retirement. 1972) for the past 20 (completed) years and is retiring on the 31st of December this year.50. 12.000. Profits in Lieu of salary c.00 c. 14584. It will be worth Rs. She hopes to invest the proceeds along with the PF proceeds. In an inflationary period which of the following statement holds true: a.50. c. 5. His firm is not covered under the provisions of the Payment of Gratuity Act.00. Basic + House Rent Allowance b. Basic + Uniform Allowance 9.00 after 15 years if inflation is 8% p. Seema has been an employee of a public sector undertaking (covered under the payment of Gratuity Act. Income from Salaries 8. 15762.

Her monthly basic salary at the time of retirement was Rs. Aditi is 30 years old. Gratuity: Rs. Ace paid her a Gratuity of Rs.75 b. 160000.20000 b.Ltd. estimate how much will he have to save per annum in order to achieve his target. Inflation is to be assumed at 5% and expected returns are 7% p. Gratuity: Rs. Gratuity: Rs. Mumbai on 31/12/2003. He is expected to live up to 75. 1. House Rent Allowance was Rs.90 c. Mr. 2. Compute: Taxable amount of Gratuity Taxable amount of HRA. Mrs. 242308 c. She deposits 25000 at the beginning of each year in deferred annuity scheme as a part of her retirement planning. 170000. aged 30. He wants to maintain his present living standard. 2. HRA: Rs. Shah lives in an ownership flat. He estimates no reduction in his expenses post-retirement.18000 d.15 18.13500 17. 2414854 d.(4 Marks) a.m. Rs. Sachin.119568 b. 117154 d. (4 Marks) a. 2474985 b. Shah retired from Ace Manufacturing Co. He spends Rs. (4 Marks) a.4000 p.m. 243579 d. Rs. HRA: Rs. wants to retire at 45. Rs . His current annual expenditure is Rs.m.9000 p.16000 c.250000.05 d.5% compound annual interest? (4 Marks) a.a.a. 125054 c. 2497857 19. If interest rate is expected to be 8. HRA: Rs.400000. She served for 30 years and 9 months.1500 p. Ace is covered under the Payment of Gratuity Act. 2487216 c. 167500.5% and inflation is 5% p. 241245 b. What is the real rate of return? (4 Marks) a. 1972. 1. aged 25 plans to retire at age 55. How much will be in the account after 25 years if it earns 9. Rs. Gratuity: Rs. and Dearness Allowance was Rs. 241940 16. 157500. Mrs.500000 a year. provided he does not wish to leave an estate. 120963 Page 13 of 13 . HRA: Rs. His life expectancy is 75. Sumeet.

r = 9. 13.Solutions 1.541.00.1080486. Real Rate = {(1+ N)/ (1+ I)} . 242308 Working Note: Gratuity calculation = 15/26*20000*21 = 242308. PMT = 25000 Type = 1. b. n = 20 years and PMT = Rs. Find the Present value of Annuity Due for the next 20 years. 12 3.86. c. Fully taxable 10. 12. Gratuity: Rs. c. d. 7% Working Note: If 4. b. n = 25.90 % 18. 20 2. a. 2497857 Working Note: Use FV function. Hence PV = Rs.13500 per annum will be taxable 17. The gratuity paid is exempt from Income Tax only to the extent of Rs. Use inflation adjusted return. 14.119568. a. 12. c. 3. Basic + Dearness Allowance 9. a.Rs.000. a.90% is the post tax rate of returns.00 Working Note: FV = Rs. 167500. Hence FV = Rs. a. Nominal interest rates are higher than real interest rates. then the pre tax nominal return = 4. where FV = Rs.350000 and 3) 15 days salary for each year of completed service.e. A & C 5.80.33 %. c. d. n = 15 years.15762. Rs . 1.16114541. n = 30 years. Future Value of Current Expenditure : Rs. d. where inflation adjusted return = 3. b.4. 50000. r = 8%. the entire amount of HRA viz. a. b. r = 8. It will be worth Rs. 16.5 %. c.1 = 1. 15. Income from Salaries 8. 2497857 19.119568 Working Note: In order to find the quantum of saving per annum we need to find 1) The future value of current expenditure (2) The Present Value of the corpus required in order to fund such expenditure post-retirement (3) The actual quantum of savings required (PMT).50.10. a. 11. Nil 6. Now find the quantum to be saved per annum up to the year of retirement i. 114.16.250000 r = 5% n = 30 b. c. 15762. Defined Benefit 7.5%. where the PV = Rs. 25 4.90 Working Note: Nominal return (N) = 7%. Hence PV (AD) = Rs. PMT.13500 Working Note: Taxable amount of Gratuity: Least of: 1) Actual amount received 2) Rs. Nominal returns adjusted for inflation. Inflation (I) = 5 %. HRA: Rs. Hence PMT = Rs. Page 14 of 14 .9%* (100/70) = 7%. Since rent paid is NIL. b. 167500 (400000-232500) Exempt amount of HRA: Least of 1) Rent paid over 10% of salary 2) 50% of salary 3) Actual amount received. Therefore the taxable amount of gratuity amounts to Rs.

Systematic b. In India. Zero b. An Asset Management Company must have a minimum corpus of Rs. NPV is calculated in the case of a series of ---------------. 10 7. Equity b. Remains same d. 15 c. 10 d. a. Month end c. A perfectly diversified portfolio will fully eliminate ______________ risk.______________ corers. Unsystematic Page 15 of 15 (1 Mark) (1 Mark) (1 Mark) (1 Mark) (1 Mark) . Modern Portfolio Theory c. 5 b. Uneven d. Index c. Increases b. Fortnightly average 6. 25 d. 15 c. Preference shares may be issued for a maximum number of ___________ years. Technical Analysis b. Decreases c. (1 Mark) a. a. a.MODULE IV: Investment Planning Questions 1. The effective interest rate earned per rupee _______ as the periods of compounding increase. Even 2. Mutual Funds have recently moved to the concept of ___________AUM calculation. 20 5. In India. (1 Mark) a. Debt 8. Value Investing Theory 4. Monthly average b. Data insufficient 3. Single c. (1 Mark) a.cash flows. Decreases for some time and then increases e. a. a. 12 b. _____________funds pay a Dividend Distribution tax on dividends. The term “Efficient Frontier” is contained in________.

Commodities b. In India Futures contracts in ___________ may be settled by delivery.10. 11. Delta c.47 % c. 60.000 in his own PPF account and same amount in his wife’s account. 14. a. Rs. Increases. Increases. Boom 13. Mr. b.000 d. 550. Alpha (1 Mark) 10. (1 Mark) a.250 and sold for Rs. Deflation c. 10. Stock Index 14. whether a liquid market exists for selling the investment.71% 15. 12. 30 d. the compound annual growth rate is: (2 Marks) a. a. A growth-oriented non-dividend paying share is bought for Rs. Remains same. Classifying an investment as a long-term investment depends primarily on. 12. the length of time the investor expects to hold the investment. 60. 70.50% d. Rs. Rs. 20. Nil c. the amount of the investment. 15 16.86% b. Decreases. The call option premium is Rs. Decreases c. A deposits Rs. 10 c. The Present Value of a sum of money _________________ as the Discounting Rate ___________________. Stocks c. Increases b. 60 b. Stagflation b. Depression d. 450 after 5 years. __________________measures the caliber of the fund manager. Beta b. The time value of the option is: (2 Marks) a. (1 Mark) a. 500 and the current share price is Rs. Data Insufficient 11. c.000 b. a. A period when an economy is experiencing substantial growth and a declining jobless rate is called_____________.000 Page 16 of 16 (1 Mark) (1 Mark) . How much maximum amount can he deposit in his nephew’s name? (2 Marks) a. The call option strike price on a share is Rs.9. Decreases e. Increases d.

Sharpe and Jensen measures. Find the value of the bond if the discount rate is 8 %. The dividend next year is expected to be Rs. 2.25 d. 1. 108.41 c. 2. 2. Calculate Treynor.5 21. 109. 1.35 years 19.17.00 % b. 1.5.2. 1.8. 1.75 c.90 % d.60 b. is currently Rs.46. 3.40 18. 111.00 The risk free rate is 9 %. Dev. A Rs.75 (4 Marks) Page 17 of 17 . Find the expected growth rate under the Constant Growth model.00.10. 110. 0. 2. 0. 4. 7% 12 % (4 Marks) (4 Marks) Find Beta of both stocks a. What is the duration? a.10.55 years c.33.25 % c. The price of Stellar Ltd. 3% 25 % FMCG Ltd.88 years b. 0. Required return on the stock is 12%.04.75 d.09. 0. (4 Marks) a.75 1. 0.85 b.100 par value bond having 10 % coupon rate will mature after 7 years. 1.16 years d. 25 % 20% Beta 0.05. a. Data on two stocks is given for 2 different scenarios: Market Return 5% 15 % Infocomm Ltd. 0.40.5. 0. 2.75 % 20. 0.25 b.15.25 c.75 d. 1. 3. -4. (2 Marks) a. A 5 year annual annuity has a yield of 6%. 1. Data on a mutual fund is given: Fund Name A Market Index Mean Return 10 % 16% Std. 2.4. -3. 2.

Decreases 11.60 18. Eg. d. 2. Hence the CARG = 12.G). Increases. Hence 1. Date use 4/1/2004 (mm-dd. 12. b. d. Redemption Value = Rs. Unsystematic 9. a. b.2. Boom 13. d. c. c. For Sett. 110. 10 Working Note: Option Premium = Intrinsic value + Time value. 0.1 Hence duration = 2.10. Hence G = 2. b. Nil Working Note: PPF investments can only be made on behalf of immediate family members.s Alpha. D1 = 4. R = 12%. Hence -4.04. It is also known as Jensen. 20. b. a. Beta of FMCG = (12-7)/ (15-5) = 0. 10 7. 12. Commodities 14.5 21.110.33. n = 5 years. Monthly average 6. c.60 Working Note: Use the PRICE Function in excel.2. Alpha 10. 10 5. -4. d. Uneven 2. a. PV = Rs. Intrinsic Value = Spot Rate .yyyy).250.RF)] . Jensen = Rp-[Rf + B(RM . the length of time the investor expects to hold the investment. 1. c. Strike Price = 50. Increases 3. Sharpe Ratio = (Rp . Debt 8. 17. d. b. b. 2. of payments __________________________ (1+yield)^no of payments . No. Modern Portfolio Theory 4. It measures the risk adjusted portfolio return. 50=10 16. a.88 years Working Note: Duration of a level annuity is: (1+Yield/Yield) . 0. Hence Time Value is 60.00 %.100. a. Maturity Date: 3/31/2004.25 Working Note: Treynor Ratio = (Rp-Rf)/ Beta.47 % Working Note: Use the RATE Function in Excel. Where P0 = 40.47 % 15. Hence Price is Rs. Frequency = 1.Solutions 1. Yield=8 %. Rate=Rs. 2. Rf)/Standard Deviation.00 % Working Note: Use the formula .04.88 years 19.25 Page 18 of 18 .00.450.5 Working Note: Beta of Infocomm is (25-3)/ (15-5) =2. Hence 0. FV = Rs.33.P0 = D1 / (R. a.

14000 b. 88 B provides a rebate of up to _____ % in respect of tax payable in respect of senior citizens. as Salary Income c. A.Module V . _____________ is a specified employee. Capital C. Interest on Recognized EPF. All of the above 2. Incomes received in India b. c. 11000 d. All of the above (1 Mark) Page 19 of 19 . Interest on Bank Deposits (1 Mark) (1 Mark) (1 Mark) (1 Mark) 7. B & C 4. Contribution to Medical Insurance Premium enjoys a deduction up to INR _____ u/s 80 D. 100 6. Deductions u/c VI A b. 50 c. a. Revenue B. 12000 5. Deducting Sec. None of the above 3. 10 Incomes d. Rebate u/s 80 C c. B c. A Resident and Ordinarily Resident Assessee is subject to tax on ________. Interest on PPF b. (1 Mark) a. Sec. ____________ receipts are not chargeable to Income tax A. Assessee earning over INR 50000 p. (1 Mark) a. Adjusted Total Income is ___________________ a. Director b. 75 d. Incomes earned outside India d. a. Which of the following is subject to tax? a. A b. Incomes deemed to be received in India c. 10000 c. Gross Total Income . Gross Total Income . 25 b. Person owning more than 20% voting rights d. Receipts by way of borrowing a. Gross Total Income . Tax & Estate Planning Questions 1. B & C d.a.

Tenant B. Mr. fully Taxable Page 20 of 20 . Death of the Trustee b. 20 % d. (1 Mark) a. Landlord a. A b. (1 Mark) a. 36000 c. A. True b. NIL b.8. Gold d. 12000 b. 2% Education Cess is only applicable to assessees in the highest Tax Bracket. whichever is beneficial. This income is________. any of the above. A & B d. He will be entitled to a maximum rebate of Rs. Applicable only to those in the highest bracket and claiming rebate u/s 88 B or 88 C e. Applicable only to those in the highest bracket and with income above Rs. Neither A nor B (1 Mark) (1 Mark) 14. a covenant may be imposed by the___________. Since October 1. Arora has three children. Death of the owner 10. Since October 1 2004. Applicable only to those claiming rebate u/s 88 D 15. (2 Marks) a. Mr. False c. Taxable subject to credit given for tax already paid in Mauritius B.5 lakhs d. A.____________ u/s 88.8. (1 Mark) a. Beneficiaries attaining the age of 18 d. NIL 11. Retirement of the Owner c. (1 Mark) a. 2004. Property b. 13. B c. the date of acquisition of the house for the purpose of capital gains will be_________________. 10 % c. Shah is an Indian Resident who earns some business from Mauritius. In the case of rented property. A Testamentary Trust is affected after the ________ a. 30 % 12. the date when he received the gift c. Equity Shares c. the date when the relative purchased/constructed the house b. long-term capital loss on sale of equity shares can be set off against longterm capital gains to the extent of_______________. Debt Mutual Funds 9. 24000 d. Capital Gains on the transfer of _________ are exempt from Long Term Capital Gains Tax subject to certain conditions. If a person inherits a house from his relative.

1999-2000 40 days. B c.000.60. Rs.140000 whereas the fair rent of the house is Rs. He comes back to India on a personal visit on 10th June 2003 and stays for 150 days in India Determine his residential status for AY 2004-05: (2 Marks) a. Non Resident b. None of them 16. Page 21 of 21 (2 Marks) . His stay in India during the last few years was: 2002-03 102 days. Rao.160000 and Standard Rent is Rs. On 17th July 2003.50. 10.000 (c) Bank interest Rs.C. Rs.s marriage.000 c. Ram has a house property whose Municipal Valuation is Rs. Calculate his gross total income after taking into consideration the eligible set-off of losses. Non Resident c. Resident b. B & C 17. Shyam leaves India for the first time on 15th April 2003 in order to take up employment in China. Ram has a house property whose Municipal Valuation is Rs. find the Gross Annual Value of the property.000 19.145000.10.140000 whereas the fair rent of the house is Rs.3. A.160000 and Standard Rent is Rs. 2004-05? (2 Marks) a. A. 145000 c. Based on the above data. Mr. Rakesh has paid municipal taxes of Rs. Resident and Ordinarily Resident c. A b. Rakesh has paid municipal taxes of Rs. 2000-01 130 days.14000.50. Rao for A. 2001-02 95 days. Co-operative Societies C. Resident but not Ordinarily Resident 20.Y. (a) Net income from salary (after standard deduction) Rs.00. Resident and Ordinarily Resident 18.14000. 2. Rs.000 (b) Loss from house property Rs. (2 Marks) a. answer the following: If actual rent receivable is Rs. Individuals B. Central Government a.000 b. Rs. not taxable because India has a Double tax Avoidance treaty with Mauritius (2 Marks) a. B c. Resident but not Ordinarily Resident d. C d. He left India for the USA on 13th January 2004. Vishal submits the following information for AY 2005-06.180000. he came to India to attend a nephew.3. 180000 b. __________ may become members of a society. A b. an American Citizen has parents were both born in Canada and whose paternal grandfather was born in Karachi in 1930.2.145000.000 d. What is the residential status of Mr.2. C d. 60. 140000 d. (4 Marks) a. Mr. 166000 21.

14000. If this property was self-occupied then deduction on interest paid on borrowed capital is restricted to Rs.180000 and unrealized rent = Rs.130000. the GAV is_______. 00. _________.60000. 180000 24. The loan is still not repaid in full. Munir borrowed Rs. 145000 b.160000 and Standard Rent is Rs. the GAV is _______________. (4 Marks) a. Based on the above data. 160000 d.14000. 131000 c. answer the following: If the annual rent = Rs. Ram has a house property whose Municipal Valuation is Rs. 00. 129000 d.14000. 162000 d. 145000 b. 131000 23. (4 Marks) a. Ram has a house property whose Municipal Valuation is Rs. 162000 b. What is the amount of deduction on account of pre-construction interest for AY 2004-05 that he can avail of Rs.20.________________. Munir borrowed Rs. 30000 c. 145000 b.a.180000 and Unrealized Rent is Rs.140000 whereas the fair rent of the house is Rs.160000 and Standard Rent is Rs. Rakesh has paid municipal taxes of Rs.145000.000 @ 9% p. 810000 c.145000. 114000 22. NIL c.145000. Based on the above data. answer the following: If actual rent receivable is Rs. 130000 c. The loan is still not repaid in full. 145000 b. the Net Annual Value is____________________ (4 Marks) a. 120000 d. 180000 d.20. on 1/10/1998 for construction of a house property which was completed on 30/09/2003. 180000 c. Based on the above data. Ram has a house property whose Municipal Valuation is Rs. 150000 b. answer the following: If Ram used the house for his own residential purpose the GAV of the house will be_______. Rakesh has paid municipal taxes of Rs.140000 whereas the fair rent of the house is Rs. (4 Marks) a. (4 Marks) a.a. Rakesh has paid municipal taxes of Rs. 131000 25. 810000 Page 22 of 22 .000 @ 9% p.140000 whereas the fair rent of the house is Rs. 30000 26.Based on the above data.60000.160000 and Standard Rent is Rs. answer the following: If the annual rent of property is Rs. on 1/10/1998 for construction of a house property which was completed on 30/09/2003. (4 Marks) a.

342000 d. 150000 b. 00. 30000 c.a. On 1/10/1998 for construction of a house property which was completed on 30/09/2003.20. The loan is still not repaid in full.27.000 @ 9% p. If the property was let out. the deduction on borrowed capital for AY 2004-05 would be______________ (4 Marks) a. 810000 Page 23 of 23 . Munir borrowed Rs.

Rao has been in India for only 181 days.180000. he cannot be considered as Resident. the date when the relative purchased/constructed the house 13. a. i. Loss from House Property + Income from bank Deposits. 145000 23. PIOs are considered as Residents only if they have been in India for 182 days or more during the relevant Previous Year. 24000 11. 30000 Working Note: If this property was self occupied then deduction for borrowed capital is Rs. d. Working Note: The GAV is Rs. Page 24 of 24 .180000+Rs.Rao has been in India for 181 days in AY 2004-05. b. False 15.30000. as the GAV of self occupied property is NIL.000 Working Note: Loss from Income from House property is allowed to be set off against salary income. Resident but not Ordinarily Resident Working Note: A person leaving India for the first time.810000/5) . A. In this case.00. 145000 Working Note: Actual Rent = Annual Rent . Hence the GTI = Salary Income . All of the above 2. 180000 Working Note: Mr. While it is true that he has been in India for 367 days in the four years preceding PY 2003-04 and has been in India for over 60 days in PY 2003-04.90000 + Rs. GAV = Higher of Standard Rent and Actual Rent. 26. Unrealized Rent i.000. A & B 14. Interest on Bank Deposits 7.810000.e.The annual interest payments since PY 1998-99 are: Rs. 342000 Working Note: If the property was let out.Rao a Person of Indian Origin. Hence GAV is Rs. the deduction on borrowed capital for AY 2004-05 would be 180000 as current period interest + 162000 as pre construction period interest. Therefore Net Annual Value = Rs.180000+Rs.3. 131000 .145000. d. A 16. Taxes paid = Rs.14000. b. 27. NIL 12.131000.180000 = Rs. Death of the owner 10. 19. NIL . c. he is considered as a Non Resident for AY 2004-05. B & C 17.120000. 162000 Working Note: He can apportion this pre-construction period interest in five equal installments commencing from AY 2004-05. Equity Shares 9. 21. c.Solutions 1.162000. a. Therefore the amount of annual deduction will be Rs. the GAV is Rs. As Mr. d. b. 3. a. b. d. only if he is Iin India for a period of over 182 days in the relevant Previous Year. This is because his grandfather was born in undivided India and so that makes Mr. Total = Rs.145000. Rs. B & C 4. 10000 5. d. for employment purposes is treated as a Resident and Ordinarily Resident. a. All of the above 8.00. Hence the Gross Total Income is Rs. a. a. b. d. 25. a. Therefore he is Resident and Not ordinarily Resident. Deductions u/c VI A 3.342000. 100 6. 22.180000+Rs. Rs. As the actual rent is less than the Standard Rent for a reason other than vacancy. c. b. Shyam is in India only for 165 days in the Previous Year.e. Gross Total Income . d. Working Note: NIL. a. 24. Non Resident 20. c. a. 18. c.

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